Millions of people around the world sacrifice closeness to their loved ones to seek a better life and financial stability in our country. But they know that on the other hand, when their remittances are received, they are supporting elderly parents, siblings, spouses and sometimes their own young children. Each year, American families send more than $100 billion abroad through international money transfers, also known as remittances.
After widespread concerns about the remittance market, Congress amended the Electronic Funds Transfer Act in 2010 to make transferring money overseas more transparent and less risky. In 2013, the CFPB’s Remission Rule codified these protections with requirements such as disclosures, cancellation and refund rights, error resolution, and record retention obligations. In other words, there were finally basic consumer protections for remittance users, similar to what you would see in the debit and credit card markets.
But some bad actors ignore the laws of the United States of America.
As one of the largest remittance providers in the United States, MoneyGram was well aware that it needed to update its practices to comply with the new law. This publicly traded company, which made more than $1.2 billion in revenue last year, knew it had to clean up. We expect MoneyGram executives and the sophisticated financial firms that support it to know this too.
Today, the Consumer Financial Protection Bureau and the New York Attorney General are suing MoneyGram for failing to comply with the law despite repeated warnings. For years, MoneyGram has left families dry waiting for their money.
The lawsuit alleges that MoneyGram illegally withheld funds, leaving its customers stranded when their money did not arrive on time. He also says MoneyGram botched instructions to its employees on how to resolve disputes. Mismanagement, including lax company policies and procedures, has sustained this chaos.
Between 2014 and 2016, before our official law enforcement investigation began, the CFPB conducted surveillance reviews of MoneyGram. These reviews revealed serious shortcomings in the company’s compliance with consumer protection laws, including the inability to quickly release funds transfers that had been authorized through their internal screening process. Rather than imposing penalties, the CFPB gave MoneyGram the opportunity to correct the issues and provided a list of twelve specific areas requiring management attention. This is standard practice in order to give companies a chance to get it right.
In 2019, the CFPB conducted a follow-up review of MoneyGram. Usually, when the CFPB does these follow-ups, it finds that companies have cleaned up their issues. But in this case, the CFPB found that MoneyGram ignored previous promises and continued to violate the law, blatantly putting profit ahead of its legal obligations.
This isn’t the first time MoneyGram has run into the law. Unfortunately, it’s not the second either. MoneyGram is a repeat offender who violates official law enforcement orders. In 2009, the company agreed to pay $18 million to settle Federal Trade Commission fraud charges and had to implement a comprehensive fraud enforcement and agent monitoring program. MoneyGram failed to do so. In 2018, the FTC resolved the repeat offenses for $125 million. But it’s not just civilian law enforcement.
MoneyGram has been implicated in consumer fraud schemes perpetrated by corrupt MoneyGram agents and others. In 2012, MoneyGram agreed to forfeit $100 million and enter into a deferred prosecution agreement with the Department of Justice, admitting it aided and abetted wire fraud and failed to maintain an effective program. of combating money laundering. But he also violated that agreement, leading to more penalties. MoneyGram’s checkerboard record also includes a host of other serious misconduct.
Today’s lawsuit against MoneyGram highlights several areas of interest to the CFPB:
First, we place a strong emphasis on repeat offenders. While most businesses under our jurisdiction strive in good faith to comply with federal consumer protection laws, I am committed to rooting out wrongdoing from businesses that break the law again and again, including those that violate prescriptions and those who ignore the results of surveillance examinations. . Where incidents of non-compliance are not simple mistakes, we understand that penalties and remedies alone may not be enough, and we will seek to seek a broader set of remedies to end repeated violations of the law. and in defiance of the rule of law.
Second, we are deepening our law enforcement cooperation with state attorneys general and state financial regulators. I’m glad we’re continuing this action with New York Attorney General Letitia James because so many New Yorkers send remittances via MoneyGram to loved ones overseas. To the extent permitted by law, I have authorized the sharing of information with MoneyGram state authorities to facilitate parallel actions. The CFPB is already expanding its efforts to ensure states can prosecute abuses of consumer financial protection.
Finally, the CFPB is concerned about the broader issues of the international payments and money transfer markets. Specifically, we believe there is significant non-compliance with the rebate rule by non-banks, and we intend to protect both rebate users and law-abiding businesses who are disadvantaged. by these savings. Indeed, since the rule came into effect in 2013, we continue to see a lack of transparency around the fees, exchange rates and taxes that constitute the true cost to consumers of sending money to the stranger. And we still run into serious problems when consumers try to either get to the bottom of mistakes or get their money back. The current remittance market is ripe for reinventing, and the CFPB will explore ways to increase competition and innovation to benefit honest families and businesses, while avoiding creating a new set of harms.